EXHIBIT 16
AMENDED AND RESTATED
ABC NEWS/STARWAVE
PARTNERSHIP AGREEMENT
THIS AMENDED AND RESTATED PARTNERSHIP AGREEMENT including the Exhibits attached
hereto (this "AGREEMENT") is entered into as of June 18, 1998 by and between DOL
ONLINE INVESTMENTS, INC., a California corporation ("ABC PARTNER"), a wholly-
owned subsidiary of DISNEY ENTERPRISES, INC., a Delaware corporation ("DEI") and
STARWAVE VENTURES, a Washington corporation ("STARWAVE PARTNER"), a wholly-owned
subsidiary of STARWAVE CORPORATION, a Washington corporation, ("STARWAVE").
This Agreement amends and restates in its entirety the Partnership Agreement by
and between the parties hereof entered into as of March 28, 1997 (the "ORIGINAL
AGREEMENT"); provided that, this Agreement shall only become effective upon the
Effective Time, as defined in and pursuant to that certain Agreement and Plan of
Reorganization, of even date herewith, by and among Infoseek Corporation, a
California corporation, Infoseek Holding Company, a Delaware corporation,
Starwave, and DEI and shall cease and be of no further force and effect in the
event that the Effective Time does not occur; and provided further that, each of
the parties hereto agrees not to terminate, amend or otherwise alter this
Agreement, or waive any of its rights hereunder, at any time prior to
immediately following the Effective Time. ABC Partner and Starwave Partner are
each sometimes referred to herein as a "Partner" and, collectively, as
"Partners".
RECITALS
1. In connection with an investment in Starwave by DEI, ABC Partner and
Starwave Partner entered into a partnership pursuant to the Original Agreement
to jointly develop, produce and exploit certain interactive media products, on
the terms and conditions contained herein and ABC, Inc., a Delaware corporation
("ABC") and Starwave entered into the ABC News/Starwave Management and Services
Agreement dated as of March 28, 1997 (the "Original Service Agreement") to
provide certain assets and services to the Partnership in accordance with the
terms and conditions set forth in the Original Service Agreement.
2. Pursuant to an agreement and plan of reorganization and a stock and warrant
purchase agreement (collectively, the "Acquisition Agreements"), DEI has agreed
to acquire approximately a 43% interest in the voting equity of Infoseek
Corporation, a California corporation, subject to the terms and conditions set
forth in the Acquisition Agreements.
3. In connection with the transactions contemplated under the Acquisition
Agreements, the Partners desire to amend and restate the Original Agreement by
entering into this Agreement and Starwave agrees and ABC agrees to cause ABC
News, Inc., its indirect wholly owned subsidiary, to amend and restate the
Original Agreement and Original Service Agreement in the form attached as
Exhibit A.
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THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, ABC Partner and Starwave Partner hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
1.1 "ABC CONTENT" means all Content that is 100% owned or controlled by
ABC or its successors or assigns. For purposes of this Section 1.1, "control"
means the ability to grant the licenses set forth herein; provided however that
if such Content is subject to the payment of royalties or other consideration to
third parties, ABC will notify Starwave in writing in advance and the
Partnership shall have the right, at its option, to include such Content in the
definition of ABC Content.
1.2 "ABC TRADEMARKS" means "ABC News" and the other marks, trade names,
trademarks, brands, names, personalities, logos and representations thereof that
are properties of ABC or its Affiliates that appear within the ABC Content,
Programming, News Products or any other materials created in association with
this Agreement and that ABC or any of its Affiliates owns or controls.
1.3 "ACT" means the New York Uniform Partnership Law, as amended from time
to time.
1.4 "ACTUAL CUMULATIVE FUNDING PERCENTAGE" means each Partner's total
actual cumulative funding divided by the total actual cumulative funding of both
Partners, expressed as a percentage.
1.5 "ADJUSTED CAPITAL ACCOUNT" means, with respect to a Partner, an
account with a balance (which may be a deficit balance) equal to the balance in
such Partner's Capital Account as of the end of the relevant year, after giving
effect to the following adjustments: (i) credit to such Capital Account any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore to the Partnership
pursuant to Regulations (S)(S) 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit
to such Capital Account such Partner's share of items described in Regulations
(S)(S) 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of
Regulations (S) 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
1.6 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to a Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account.
1.7 "ADVISORY COMMITTEE" has the meaning set forth in Section 3.1.
1.8 "AFFILIATE" means, with respect to any person, any person directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with
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such person. Notwithstanding the foregoing, for purposes of this Agreement,
Starwave and Starwave Partner shall not be considered as Affiliates of ABC or
DEI.
1.9 "ANNUAL BUSINESS PLAN" has the meaning specified in Section 3.6.
1.10 "ANNUAL FINANCIAL STATEMENTS" has the meaning specified in Section
3.7.
1.11 "ASSET VALUE" with respect to any Partnership asset means the
following:
(i) the fair market value as determined by an appraiser mutually
agreed to by the Partners of any asset contributed by a Partner to the
Partnership;
(ii) the fair market value as determined by an appraiser mutually
agreed to by the Partners on the date of distribution of any Partnership asset
distributed to any Partner; or
(iii) the fair market value as determined by an appraiser mutually
agreed to by the Partners of all Partnership assets at the time of (a) the
admission of an additional Partner or (b) the liquidation of the Partnership
pursuant to Section 11.6.
1.12 "BROADBAND" means programming that requires transmission at data rates
which would enable real time, full screen, full motion video at equal to or
better than NTSC broadcast resolution.
1.13 "CAPITAL ACCOUNT" has the meaning set forth in Section 6.5.
1.14 "CASH EXPENDITURES" means, for any period, the actual amount of cash
expenditures and capital expenditures of the Partnership during such period.
1.15 "CLAIMS" has the meaning specified in Section 12.1.
1.16 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
1.17 "CONTENT" means audio and audio visual material, photographs, art
work, videos, graphics, text or sound recordings.
1.18 "COSTS" means all direct costs and allocated costs, whether incurred
by ABC, DEI or Starwave in connection with the Service Agreement or by the
Partnership, that are associated with the development, production, hosting,
maintenance, operation, distribution and exploitation of the News Products.
1.19 "DISNEY MEMBER" has the meaning set forth in Section 3.3.
1.20 "FIXED MEDIA PRODUCTS" means multimedia content products developed for
distribution to end users on any platform (including, without limitation, MS-
DOS, Windows,
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Macintosh, Sega, Nintendo, CD-ROM, Sony Playstation and 3DO systems) designed to
be read on an electronic device but excluding such products if they include a
Narrowband-delivered component and such products would not be commercially
competitive (as reasonably determined in good faith by the Partners) without the
inclusion of a Narrowband-delivered component.
1.21 "FORCE MAJEURE EVENT" has the meaning specified in Section 13.5.
1.22 "FORECASTED CASH EXPENDITURES" means, for any period, the forecasted
cash expenses and capital expenditures of the Partnership during such period,
prepared in accordance with GAAP and consistent with the Restated Initial
Business Plan and Annual Business Plans.
1.23 "GAAP" means Generally Accepted Accounting Principles, according to
U.S. accounting practices.
1.24 "GAIN YEAR" has the meaning specified in Section 6.1(a)(ii).
1.25 "GENERAL MANAGER" means the general manager appointed in accordance
with Section 3.1 to manage the operations of the News Products.
1.26 "INFOSEEK MEMBER" has the meaning specified in Section 3.1.
1.27 "INTELLECTUAL PROPERTY RIGHTS" means any and all (by whatever name or
term known or designated) tangible and intangible and now known or hereafter
existing (a) rights associated with works of authorship throughout the universe,
including but not limited to copyrights, moral rights, and mask-works, (b)
trademark, service marks and trade name rights and similar rights, (c) trade
secret rights, (d) patents, designs, algorithms and other industrial property
rights, (e) all other intellectual and industrial property and proprietary
rights (of every kind and nature throughout the universe and however designated)
(including without limitation logos, character rights, "rental" rights and
rights to remuneration), whether arising by operation of law, contract, license
or otherwise, and (f) all registrations, applications, renewals, extensions,
continuations, divisions or reissues thereof now or hereafter in force
throughout the universe (including without limitation rights in any of the
foregoing).
1.28 "INTEREST" OR "PARTNERSHIP INTEREST" means the entire ownership
interest of a Partner in the Partnership.
1.29 "LOSS YEAR" has the meaning specified in Section 6.1(a)(i).
1.30 "NARROWBAND" means programming that does not require transmission at
data rates which would enable real time, full screen, full motion video at equal
to or better than NTSC broadcast resolution.
1.31 "NET INCOME" AND "NET LOSS" means for each fiscal year or other
period, the Partnership's taxable income or loss for such year or period
determined in accordance with
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(S)703(a) of the Code, including therein all items of income, gain, loss or
deduction required to be stated separately pursuant to (S)703(a)(1) of the Code,
with the following adjustments:
(i) Any tax-exempt income of the Partnership described in
(S)705(a)(1)(B) of the Code which is not otherwise taken into account in
determining Net Income or Net Loss shall be included as if it were taxable
income or loss;
(ii) Any expenditures of the Partnership described in
(S)705(a)(2)(B) or treated as such expenditures under Regulation (S)1.704-
1(b)(2)(iv)(i) not otherwise taken into account in computing Net Income and Net
Loss shall be treated as deductible items;
(iii) Upon the occurrence of an event described in Section 1.9(ii) or
(iii), the difference between the asset basis and Asset Value as determined in
such provision shall be taken into account as gain or loss;
(iv) Gain or loss resulting from the disposition of property from
which gain or loss is recognized for federal income tax purposes shall be
determined with reference to the Asset Value of the property disposed of;
(v) Cost recovery deductions shall be determined based on the Asset
Value of property in lieu of such deductions used in computing such taxable
income or loss;
(vi) Any items which are specially allocated pursuant to Section 6.6
shall not be taken into account.
1.32 "NEWS PRODUCTS" means the Remote Access Products developed, produced,
marketed or otherwise exploited under this Agreement containing broad national,
international and local news Content, including, by way of example and without
limitation, stories and features regarding national, international and local
affairs and stories and features regarding business/finance, entertainment,
weather, environmental and other subjects, to the extent such subjects are of
national or international significance or are treated as such in traditional
news media.
1.33 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
(S) 1.704-2(b)(4).
1.34 "PARTNER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect
to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
liability (within the meaning of Regulations (S) 1.704-2(b)(3)), determined in
accordance with Regulations (S) 1.704-2(i)(3).
1.35 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations (S)(S) 1.704-2(i)(1) and 1.704-2(i)(2).
1.36 "PARTNERSHIP" means the general partnership formed by this Agreement.
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1.37 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
(S)(S) 1.704-2(b)(2) and 1.704-2(d).
1.38 "PERSON" means any individual, partnership, corporation, trust or
other entity.
1.39 "PORTAL PRODUCTS" means the internet portal service to be named "Go
Networks," or another name, developed and produced by Infoseek utilizing the
subject matter licensed under that certain License Agreement between DEI and
Infoseek of even date herewith, including but not limited to all channels, sub-
channels, sections, sites, features, services, utilities and applications
relating thereto.
1.40 "PROFIT PARTICIPATION" means the Partner's proportionate share of Net
Income, expressed as a percentage, in a gain year adjusted pursuant to Section
6.2.
1.41 "PROGRAMMING" means the programming included in the News Products
including, without limitation, all HTML, Java, and/or other formatted text
files, all related graphics files, animation files, data files, multimedia
files, modules, routines and objects, and the computer software and all of the
script or program files required to exploit such materials and that collectively
control the display of and end user interaction with the programming.
1.42 "PROMOTIONAL SERVICE AGREEMENT" means the agreement between American
Broadcasting Companies, Inc. and Infoseek, dated as of the date hereof.
1.43 "REGULATIONS" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time.
1.44 "RELATED PERSONS" has the meaning specified in Section 12.1.
1.45 "REMOTE ACCESS PRODUCTS" means Programming intended for distribution
by any Narrowband interactive transmission method. This definition excludes any
and all Programming that requires Broadband transmission and also excludes (a)
products developed for PDAs, pagers, screen phones and other future handheld
devices and (b) Fixed Media Products.
1.46 "REQUIRED CUMULATIVE FUNDING PERCENTAGE" means each Partner's total
cumulative funding if it were to have funded at its required cash contribution
amount in each year, divided by the total cumulative funding for both Partners
if each had funded at its required level in each year, expressed as a
percentage.
1.47 "RESTATED INITIAL BUSINESS PLAN" has the meaning specified in Section
3.6.
1.48 "REVENUES" means all revenues, as determined in accordance with GAAP,
including, without limitation, advertising, subscription, usage, merchandising,
licensing or other revenues derived from exploitation of the News Products, the
Technology owned by the
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Partnership or jointly by the Partners contained therein or utilized in
connection therewith or from any other Intellectual Property Rights, Content or
Programming owned by the Partnership or jointly by the Partners but in all
events excluding Portal Products revenues and Infoseek-branded Search or
Directory revenues. For the avoidance of doubt, any Revenues derived from the
first page seen by a viewer after a single click on a name, logo, icon, link,
headline or other content that is supplied by the Partnership or one of the
Partners, for use in the News Product. For example, if a user clicks on the "Go
News" channel within the Portal Products and the first page to which the user is
directed contains a news story supplied by ABC, after the single click on the
ABC news story, the user is within the News Products and revenues derived from
such page shall be deemed Revenues hereunder.
1.49 "SEARCH OR DIRECTORY" means products, services, components or other
subject matter (i) for searching content such as searches of the World Wide Web,
directories, USENET News, or other databases, or (ii) hierarchical listings of
sites or services, which listings are organized by categories.
1.50 "SERVICE AGREEMENT" means the Amended and Restated ABC News/Starwave
Management and Services Agreement attached hereto as Exhibit A.
1.51 "STANDARDS" means the written policy of standards and practices for
content and advertising that apply to the News Products under this Agreement,
attached as Exhibit B.
1.52 "STARWAVE TRADEMARKS" means "Starwave" and the other marks, trade
names, trademarks, brands, names, personalities, logos and representations
thereof that are properties of Starwave Partner or its Affiliates that appear
within the News Products or any other materials created in association with this
Agreement and that Starwave Partner owns or controls.
1.53 "TECHNOLOGY" means all software, hardware and middleware required or
appropriate to (i) transform the Content into the Programming, (ii) create,
modify or maintain the Programming, or (iii) deliver the Programming in an
online format.
1.54 "TERM" shall have the meaning set forth in Section 11.1.
1.55 "TERRITORY" means the United States and Canada.
1.56 "TRANSFER" means, as a noun, any voluntary or involuntary transfer,
sale, assignment, pledge, hypothecation, encumbrance or other disposition, and,
as a verb, voluntarily or involuntarily to transfer, sell, assign, pledge,
hypothecate, encumber or otherwise dispose of.
2. PARTNERSHIP
2.1 PARTNERSHIP NAME. The name of the Partnership shall be ABC
News/Starwave Partners, d/b/a AIV Ventures or such other name as the Partners
may from time to time determine by mutual approval, and all business of the
Partnership shall be conducted under
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such name. Such name shall be the exclusive property of the Partnership, and no
Partner shall have any right to use, and each Partner agrees that neither it nor
its Affiliates shall use, such name or derivatives thereof incorporating "ABC"
or "AIV" or "Starwave" other than as permitted by the mutual agreement of the
Partners. The Partnership shall execute and file and/or publish all assumed name
statements and certificates required by law to be filed and/or published in
connection with the operation of the Partnership.
2.2 PLACE OF BUSINESS. The principal place of business of the Partnership
shall be located at 00 Xxxx 00/xx/ Xxxxxx, Xxx Xxxx, Xxx Xxxx, or at such other
place as the Partners may from time to time determine by mutual approval. The
Partnership may have such other or additional places of business or headquarters
as the Partners may from time to time designate.
2.3 PURPOSE. The purpose of the Partnership shall be to develop, produce,
market, distribute and otherwise exploit the News Products in the Territory.
Notwithstanding the foregoing, the Partners acknowledge that distribution of the
News Products on the Internet shall, by definition, be on a worldwide basis;
provided, that it is the present intention of the Partners that the Partnership
shall not deploy the Programming on servers or other delivery systems that are
located outside the Territory. Notwithstanding the foregoing, if DEI determines
to develop, produce, market, distribute and otherwise exploit news-related
Remote Access Products outside the Territory, the Disney Member will, when
possible, provide the Infoseek Member with a first offer to discuss in good
faith the possibility of delivering the News Products in additional countries or
regions or otherwise including the Partnership, Starwave Partner or Infoseek as
a partner or participant to any new news-related Remote Access Products that may
be developed for any additional country or region; provided, that Starwave
Partner acknowledges that the worldwide business activities and strategies of
DEI and its Affiliates may preclude the participation of the Partnership,
Starwave Partner or Infoseek in any such news-related Remote Access Products.
The News Products shall include, without limitation, an entertainment news
component that includes Programming from the "Mr. Showbiz" property contributed
by Starwave to the Partnership pursuant to the Original Service Agreement as
well as Remote Access Products containing personal finance and business news.
If within six (6) months after the Effective Date, Disney has not entered into
an agreement with a third party for local news Remote Access Products and during
such period Starwave Partner notifies Disney in writing that Starwave Partner
has the ability to include local news Remote Access Products as News Products
hereunder, such local news Remote Access Products shall become News Products
effective upon the date of such notice.
2.4 AUTHORITY OF PARTNERS LIMITED. No Partner shall have any authority to
hold himself out as a general agent of another Partner or the Partnership in any
business activity other than that of the Partnership, and no Partner shall have
any authority to act for, or to assume any obligation or responsibility on
behalf of, any other Partner or the Partnership, except as expressly provided in
this Agreement or as authorized by the Partners. No Partner shall be liable to
third persons for Partnership losses, deficits, liabilities or obligations
except as expressly agreed to in writing by such Partner, unless the assets of
the Partnership shall first be exhausted. In any matter between the Partnership
on the one hand and either Partner on the other hand or in any matter between
the Partners, neither the Partnership nor any Partner shall
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be bound by the act of a Partner unless such Partner is acting in accordance
with the limitations and provisions set forth in this Agreement. Except as
otherwise expressly provided herein, decisions of the Partnership shall be made
by unanimous approval of the Partners.
2.5 PARTITION. No Partner, nor any successor-in-interest to such Partner,
shall have the right, while this Agreement remains in effect, to have the
property of the Partnership partitioned or to file a complaint or institute any
proceeding at law or in equity to have the property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors,
representatives and assigns, hereby waives any such right.
3. GOVERNANCE
3.1 APPOINTMENT OF GENERAL MANAGER. The day-to-day operations of the News
Products will be managed by a General Manager nominated by DEI and mutually
appointed by the Partners. The General Manager shall report to the Advisory
Committee. The General Manager shall be a Partnership employee and subject to
termination by either the Starwave Member or the Disney Member. The General
Manager shall be located in New York City, or elsewhere in the event of mutual
agreement by the Advisory Committee. In the event of the termination or
resignation of a General Manager, the Disney Member shall have the right to
nominate candidates for a new General Manager; provided, that if three
successive nominees are not approved by the Advisory Committee, the Disney
Member shall have the sole right of approval for the subsequent nominee. This
process will be repeated in the event of any replacement of a General Manager.
Notwithstanding the foregoing, in the event that a General Manager is terminated
by the Starwave Member unilaterally, the Disney Member shall have the unilateral
right to appoint a replacement General Manager, subject to Starwave Partner's
subsequent rights to terminate the replacement General Manager. DEI agrees to
cause the Disney Member to use its reasonable good faith efforts to nominate
well qualified, "best available" candidates as General Manager candidates.
3.2 DUTIES OF GENERAL MANAGER. The General Manager shall implement the
Restated Initial Business Plan and subsequent Annual Business Plans and shall
exercise control over the day-to-day operations of the Partnership, including
editorial tactics, editorial strategy and creative development (subject to
Section 3.5(a)), production (technical or otherwise), distribution,
merchandising, advertising sales, affiliate relations (subject to Section
3.5(b)) and marketing and promotion (subject to Section 3.5(c)) of the News
Products, subject to the oversight and ultimate approval of the Advisory
Committee.
3.3 ADVISORY COMMITTEE. As of the Effective Time, Infoseek and Disney
will respectively appoint the Infoseek CEO and the Chairman of Buena Vista
Internet Group as the sole members (the "Infoseek Member" and the "Disney
Member" respectively) of an advisory committee (the "Advisory Committee"). Each
of Infoseek and Disney will have the right to replace its designee on the
Advisory Committee; provided, that Infoseek and Disney agree to consult with
each other prior to any such replacement. Any such replacement will be with an
officer of Infoseek or Disney, or their respective Affiliates, of similar
responsibilities and experience, to the extent possible. The Advisory Committee
shall oversee the management and
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operations of the Partnership, shall make significant business decisions of the
Partnership and shall participate regularly in the overall supervision,
direction and control of the Partnership as set forth on Exhibit C (as amended
as of the date hereof). The Advisory Committee will meet monthly or as otherwise
appropriate to discuss and advise the General Manager on overall News Products
key issues, and performance within the parameters established in the Annual
Business Plans. Except as otherwise expressly provided herein, decisions of the
Advisory Committee shall be made by unanimous approval of the Infoseek Member
and Disney Member.
3.4 ORGANIZATIONAL STRUCTURE. The Partners intend to staff the operations
of the Partnership in accordance with the Restated Initial Business Plan, as may
be modified from time to time upon the agreement of the Partners. Thereafter,
the General Manager (and the relevant senior employees) shall hire/fire/promote
Partnership employees at their discretion (subject to compliance with the
Restated Initial Business Plan and Annual Plans). Notwithstanding the
foregoing, it is the intention of the parties that the employees providing
technology-related services to the Partnership shall be primarily employed by
Starwave and the employees providing editorial-related services to the
Partnership shall be primarily employed by ABC.
(a) CONTENT DEVELOPMENT/TRANSFORMATION/INTEGRATION.
(i) ABC CONTENT. ABC shall be responsible for the development
of ABC Content for the News Products and for the transformation of ABC Content
into Programming and integration of the Programming into the News Products as
set forth in the Service Agreement. The senior employee in such group, who shall
be an ABC employee and subject to hiring/firing by ABC, shall report on a day-
to-day basis to the General Manager, with direct reporting as well to an ABC
designated executive for oversight of editorial and creative aspects of such
Content.
(ii) NON-ABC CONTENT. The Partnership shall include a group of
employees responsible for the development of Content (other than ABC Content)
for the News Products and for the transformation of such Content into
Programming and integration of the Programming into the News Products. The
senior employee in such group, who shall be an ABC employee and subject to
hiring/firing by ABC and firing by Starwave, and shall report on a day-to-day
basis to the General Manager, with direct reporting as well to an ABC designated
executive for oversight of editorial and creative aspects of such Content.
(b) ABC NETWORK AFFILIATE RELATIONS. The Partnership shall include a
group of Partnership employees responsible for managing the relationship with
ABC's affiliated television and radio stations, subject to Section 3.5(b). The
senior employee in such group shall report directly to the General Manager. ABC
shall have veto power over the hiring/firing of such employee. ABC shall, from
time to time, review the policies and practices of such group and assist the
General Manager in conforming such policies and practices with those used by
ABC.
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(c) ADVERTISING SALES.
(i) The Partnership may engage Starwave or any qualified third
party (including Affiliates) to provide representation services for advertising
sales for the News Products. The senior employee of any non-Affiliated party
providing representation services shall be subject to hiring/firing by either
Starwave or ABC, shall report to the General Manager, with (1) a report to the
Disney Member on matters concerning group advertising sales in association with
Disney products and (2) a report to the Infoseek Member on matters concerning
group advertising sales in association with Infoseek products.
(ii) The Advisory Committee shall mutually agree in writing on
the characteristics of all advertising that will appear with or in the News
Products, including without limitation, matters of price, content, size,
placement, quantity, frequency of changes, and identity of advertisers. The
Advisory Committee further shall mutually agree in writing on the "rate card"
for the advertising to be sold in connection with the News Products.
(iii) The General Manager and the advertising sales group shall
at all times comply with the Standards.
(iv) The Advisory Committee shall coordinate group advertising
sales for the News Products in association with DEI (which shall provide the
group advertising sales services in association with Disney products) and with
Infoseek (which shall provide the group advertising sales services in
association with Infoseek products), as set forth in the Service Agreement.
During the Term, such group advertising services may become a responsibility of
the Partnership or the Partners collectively, upon the mutual agreement of the
Partners.
(d) MARKETING/PROMOTION. The Partnership shall include a group of
Partnership employees responsible for marketing and promotion for the News
Products on Narrowband platforms and in other media, subject to Section 3.5(c).
The senior employee in such group shall be subject to hiring/firing by ABC and
firing by Starwave and shall report directly to the General Manager. In
addition, ABC shall provide marketing and promotion services for the News
Products in other media, as set forth in the Service Agreement, and in
accordance with the Promotional Services Agreement.
(e) FINANCE AND BUSINESS DEVELOPMENT. The Partnership shall include a
group of Partnership employees responsible for finance and business development
activities (including, without limitation, general and administrative
activities). Such group (and the General Manager) shall perform their
administrative and finance responsibilities in accordance with DEI's standards
of financial controls.
(f) BILLING, COLLECTION, CUSTOMER SERVICE. Starwave shall be
responsible for billing, collection, customer service and other "back office"
functions for the Partnership in accordance with the Service Agreement. During
the Term, such functions (or portions thereof) may become a responsibility of
the Partnership or the Partners collectively, upon the mutual agreement of the
Partners.
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(g) TECHNOLOGY DEVELOPMENT AND MAINTENANCE. Starwave shall be
responsible for the technology development and maintenance relating to the News
Products in accordance with the Service Agreement. It is the present intention
of the parties that the preponderance of the technology development and
maintenance relating to the News Products shall be performed by Starwave. The
General Manager, in accordance with the Restated Initial Business Plan or Annual
Business Plans, may acquire or license additional or substitute Technology (i)
on an incidental and nonmaterial basis, (ii) if Starwave is in breach of its
material obligations under its agreements with the Partnership, (iii) if the
costs to the Partnership of acquiring or licensing Technology from a third party
are significantly less than the costs to the Partnership of acquiring or
licensing such or similar Technology from Starwave and such third-party
Technology from Starwave and such third-party Technology is fully scaleable and
compatible with other Technology used for the News Product and otherwise
appropriate for its intended uses, or (iv) if Starwave otherwise agrees. In
addition, the General Manager, in accordance with the Restated Initial Business
Plan or Annual Business Plans may acquire or license additional or substitute
Technology if, in the General Manager's reasonable opinion, the inability to so
acquire or license such Technology would have a material impact on the overall
quality and competitive position of the News Products. In such event, Starwave
shall have a three (3) day period to meet with the General Manager to attempt to
resolve the issues. If the issues have not been resolved in the three (3) day
period, the General Manager shall be entitled to present the issues to the
Partners for resolution based upon the mutual agreement of the Partners. During
the Term, such technology development and maintenance (or portions thereof) may
become a responsibility of the Partnership or the Partners collectively, upon
the mutual agreement of the Partners.
(h) HOSTING. Starwave shall be responsible for the hosting of the
News Products in accordance with the Service Agreement. During the Term, the
Partners may mutually agree to have the Partnership perform hosting functions
for the News Products, as may be approved in an Annual Business Plan or
otherwise as determined by the Partners. In addition, the General Manager may
utilize unaffiliated third parties to provide hosting of the News Products (i)
if the costs of any such hosting to the Partnership are significantly less than
the costs to the Partnership of such hosting services as charged by Starwave and
such third-party hosting is fully scaleable and compatible with the Technology
and hosting services provided for the News Products and otherwise appropriate,
(ii) Starwave is in breach of its material hosting obligations hereunder, or
(iii) if Starwave otherwise agrees.
(i) OTHER. The Partners shall mutually agree on whether any
additional necessary support for the development, production and delivery of the
News Products in any category other than as listed in this Agreement shall be
included as a responsibility of the Partnership or one or both Partners.
3.5 ABC'S CONTROL.
(a) EDITORIAL AND CREATIVE. ABC shall exercise sole and final control
over all editorial and creative aspects of the News Products and all portions
thereof.
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(b) ABC NETWORK AFFILIATE RELATIONS. ABC shall exercise sole and
final control over all ABC Network affiliate relations matters associated with
the News Products.
(c) MARKETING AND PROMOTIONS. ABC shall exercise sole and final
control over all uses or references to any ABC Trademark contained in marketing
and promotions associated with the News Products. Any use of an ABC Trademark
by the Partnership or Starwave shall require the prior approval of ABC, which
may be withheld at ABC's sole discretion. ABC shall cooperate in good faith
with the Partnership to agree on a templated use of ABC Trademarks from time to
time to avoid recurrent approvals.
(d) ADVERTISING SALES. The General Manager and the Partnership's
advertising sales group shall frequently consult with the ABC News' advertising
sales executives in order to coordinate, when possible, advertising
opportunities among the News Products and ABC News' products.
3.6 BUSINESS PLAN AND BUDGET, FORECASTED CASH EXPENDITURES.
(a) Prior to the date hereof, DEI and Starwave have agreed on a
restated three year business plan for the News Products, attached hereto as
Exhibit D (the "Restated Initial Business Plan"). At least thirty (30) days
prior to the beginning of each fiscal year (ending September 30) during the
Term, the General Manager shall prepare for the Partners' approval an annual
business plan and budget for the subsequent fiscal year (which shall include,
without limitation, a statement of Forecasted Cash Expenditures for such fiscal
year), utilizing the categories and methods established in the Restated Initial
Business Plan (i.e., spending requirements and limits, Revenue and operating
income targets)(each, an "Annual Business Plan and Budget"). If during the
first three years after the date hereof, an Annual Business Plan and Budget is
not mutually approved by the Partners by the beginning of a fiscal year, the
Partners shall continue to perform their obligations under this Agreement based
on the standards set forth in the Restated Initial Business Plan for the
corresponding year. After the first three years after the date hereof, if an
Annual Business Plan and Budget for any fiscal year are not mutually approved by
the Partners by the beginning of a fiscal year, the Partners shall continue to
perform their obligations under this Agreement based on the standards set forth
in the Annual Business Plan and Budget for the prior fiscal year, increased in
an amount equal to 50% of the increase in the projected Revenue growth for the
Partnership between the current fiscal year and the subsequent fiscal year (as
agreed between the Partners), provided, that if such projected Revenue growth is
a negative number, such aggregate amount shall be increased in an amount equal
to the percentage increase or decrease in the Consumer Price Index for Urban
Wage Earners and Clerical Workers [All Urban Consumers], U.S. City Average
(1982-84 = 100) Unadjusted, all items index, published by the Bureau of Labor
Statistics, United States Department of Labor (the "CPI Factor") for the
preceding twelve-month period. In the event that the Partners cannot agree on
projected Revenue growth for the Partnership for a particular fiscal year, the
Annual Business Plan and Budget for such fiscal year shall be increased in an
amount equal to the actual growth rate in Revenues between the two prior fiscal
years. If such growth rate is a negative number, such Annual Business Plan and
Budget shall be
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adjusted by the CPI Factor. In each year, the Annual Business Plan and Budget as
adjusted as provided above shall be the baseline for any adjustments for the
subsequent year.
(b) Within fifteen (15) days prior to the beginning of each fiscal
quarter during the Term, the General Manager shall prepare for the Partners'
approval a statement of Forecasted Cash Expenditures and forecasted Revenues (as
agreed between the Partners) for such fiscal quarter. If any such statement is
not mutually approved by the Partners by the beginning of a fiscal quarter, (i)
if the fiscal quarter in question falls within the period reflected in the
Restated Initial Business Plan, then the Forecasted Cash Expenditures and
forecasted Revenues set forth therein for the applicable fiscal quarter
calculated from the annual amounts in the Annual Business Plan and Budget shall
be applicable or (ii) if the fiscal quarter in question is after the period
reflected in the Restated Initial Business Plan, then the Forecasted Cash
Expenditures for such fiscal period will be as follows: that fiscal quarter's
forecasted Revenues is compared with the Revenues in the same quarter from the
prior year and a Revenue growth percentage is calculated. 50% of this growth
percentage is then applied to the Actual Cash Expenditures for the same fiscal
quarter from the prior year to determine the Forecasted Cash Expenditures for
the fiscal quarter under consideration. If the Partners cannot agree on the
Revenue growth percentage increase, then the prior period Revenue growth
percentage will be utilized as follows: 50% of the actual year-over-year Revenue
growth percentage achieved in the same quarter in the prior year is calculated.
The growth percentage is then applied to the Actual Cash Expenditures for the
same quarter from the prior year to determine the Forecasted Cash Expenditures
for the current quarter, provided, that if such projected Revenue growth is a
negative number, such aggregate amount shall be increased in an amount equal to
the percentage increase or decrease in the Consumer Price Index for Urban Wage
Earners and Clerical Workers [All Urban Consumers], U.S. City Average (1982-84 =
100) Unadjusted, all items index, published by the Bureau of Labor Statistics,
United States Department of Labor for the preceding twelve-month period. In each
year, the Annual Business Plan and Budget as adjusted as provided above shall be
the baseline for any adjustments for the subsequent year.
3.7 OTHER REPORTS. Within fifteen (15) days after the end of each fiscal
year during the Term, the General Manager shall prepare and deliver, with the
assistance of the Partners, unaudited twelve month profit and loss statements,
including detailed breakdowns of sources of Revenues and items of Costs for each
fiscal quarter as well as a statement of Net Cash Flow for such fiscal year
(collectively, the "Annual Financial Statements"). Within five (5) days after
the end of each fiscal quarter during the Term, the General Manager shall also
prepare and deliver, with the assistance of the Partners, unaudited quarterly
profit and loss statements, including detailed breakdowns of sources of Revenues
and items of Costs in such fiscal quarter and quarterly cash flow statements.
In addition, within ten (10) days prior to the start of any fiscal quarter, the
General Manager shall prepare and deliver quarterly forecasts, utilizing the
categories and methods established in the Restated Initial Business Plan. The
Partners acknowledge the importance of meeting the financial reporting deadlines
to ensure necessary financial and accounting compliance; provided however, that
immaterial and infrequent failures to meet such deadlines shall not be
considered as material breaches of this Agreement.
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4. STARWAVE, ABC AND DEI OBLIGATIONS TO THE PARTNERSHIP
During the Term, Starwave, ABC and DEI shall have the obligations to the
Partnership set forth in the Service Agreement.
5. MERCHANDISING
DEI agrees to provide (or cause its Affiliates to provide) and the
Partnership agrees to purchase (subject to agreement on terms), e-commerce
services to the Partnership, including, without limitation, store design,
transaction processing, web hosting, inventory management, fulfillment and
customer service. In exchange for such services, the Partnership shall pay DEI
its Costs (with the allocated costs to be mutually agreed) in providing such
services, plus a to-be-agreed markup on such Costs or a to-be-agreed upon
revenue share. In addition, DEI shall have joint ownership of all customer
information for use for its business purposes.
6. FINANCIAL PARTICIPATION
6.1 CAPITAL CONTRIBUTIONS.
(a) In accordance with the limits set forth in each Annual Business
Plan, the Partners shall make capital contributions at the start of each fiscal
quarter or from time to time as the Partners otherwise agree in accordance with
Forecasted Cash Expenditures:
(i) Starwave Partner shall make capital contributions in
sufficient amounts to provide for sixty percent (60%) of the Forecasted Cash
Expenditures and ABC Partner shall make capital contributions in sufficient
amounts to provide for forty percent (40%) of the Forecasted Cash Expenditures
in any fiscal quarter during the Term in which Net Losses are expected to occur
(a "Loss Year").
(ii) Starwave Partner shall make capital contributions in
sufficient amounts to provide for fifty percent (50%) of the Forecasted Cash
Expenditures and ABC Partner shall make capital contributions in sufficient
amounts to provide for fifty percent (50%) of the Forecasted Cash Expenditures
in any fiscal quarter during the Term in which Net Income is expected to occur
(a "Gain Year").
(b) Promptly upon the delivery of the Annual Financial Statements of
the Partnership, the Partners shall reconcile the differences, if any, between
the Forecasted Cash Expenditures and the Cash Expenditures as reflected in the
Annual Financial Statements, such that the total amount contributed by each
Partner with respect to a fiscal year is in accordance with the percentages
provided in Section 6.1(a) based on the Cash Expenditures with respect to such
fiscal year.
(c) To the extent that a Technology is developed by either Partner in
connection with this Agreement specifically for use in the development or
delivery of the News Products, the other Partner can elect, in its discretion
(but only at the time initial funding for
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the Technology is requested, unless agreed to by the Partner developing such
Technology), to provide its proportionate share of the funding associated with
such Technology, in which event such Technology shall become jointly owned.
(d) For purposes of this Agreement, with respect to any capital asset
owned by a Partner and utilized in association with the News Products, either
Partner may charge the Partnership a fee for the use of such capital asset, in
accordance with limits set forth in the Restated Initial Business Plan and
Annual Business Plan.
6.2 FAILURE TO MAKE CONTRIBUTIONS.
(a) If any Partner fails to make any required cash contribution when
due pursuant to Section 6.1 (a "Nonfunding Partner"), the other Partner may, in
its discretion, elect to make a cash contribution in the amount of all or a
portion of the unfunded portion of the required contribution, in which event the
funding Partner's ("Funding Partner") Capital Account shall be adjusted as
follows: for every $1.00 of the unfunded portion of such required contribution
funded by the Funding Partner, the Funding Partner shall receive an increase of
$1.00 in its Capital Account.
(b) In addition, at the end of each fiscal year, each Partner's Actual
Cumulative Funding Percentage will be compared with its Required Cumulative
Funding Percentage. In the event that such Partner's Actual Cumulative Funding
Percentage is less than its Required Cumulative Funding Percentage, such
Partner's Profit Participation shall be adjusted at the beginning of the next
fiscal year such that the Nonfunding Partner's Profit Participation will be (i)
decreased 1 percentage point for each 1 percentage point shortfall in the event
the Nonfunding Partner's total cumulative funding exceeds that of Funding
Partner and (ii) will be decreased 2 percentage points for every 1 percentage
point (the "dilution ratio") in the event that the Nonfunding Partner's total
cumulative funding is less than that of the Funding Partner. The Funding
Partner will receive a corresponding increase in its Profit Participation. An
example is attached as Exhibit E.
(c) In any fiscal year in which the Starwave Partner's Profit
Participation falls below 25%, their control rights under this Agreement and the
Services Agreement shall be suspended, such that, for example, the Starwave
Partner shall not have a vote in any of the matters that previously required the
unanimous approval of the Advisory Committee. This right would be reinstated in
the event that Starwave Partner's Profit Participation again rises above 25%,
subject to subsequent suspension if Starwave Partner's Profit Participation
again falls below 25%.
(d) Prior to the end of the first fiscal year in which the Partnership
derives Net Income (i.e., as opposed to a Net Loss year), a Nonfunding Partner
shall be entitled to make capital contributions up to its Required Cumulative
Funding Percentage as well as additional funding necessary to equalize the
results of the cumulative overfunding by the Funding Partner at the same
dilution ratio (as defined above) and adjust its Profit Participation upward;
provided, however, at the end of the first fiscal year in which the Partnership
derives Net
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Income, while a Nonfunding Partner may make capital contributions to maintain
its Actual Cumulative Funding Percentage, it shall not be entitled to make
capital contributions to equalize the results of the cumulative overfunding by
the Funding Partner.
(e) In the event that Starwave Partner's Profit Participation falls
below 25% and Starwave Partner desires to fund a subsequent required cash
contribution and is unable to access capital on reasonable terms as determined
by the independent audit committee of the Board of Directors of Starwave Partner
given the Company's financial condition and said terms would cause an adverse
impact on Starwave Partner's financial condition, Disney Partner will loan
Starwave Partner the necessary funds at an interest rate equal to the then prime
rate plus 1% for a twelve month term. If the loan is not repaid with accrued
interest thereon at the end of the twelve month period, such amounts will be
credited to Disney Partner's Capital Account and the Disney Partner's Actual
Cumulative Percentage would be adjusted at the beginning of the next fiscal year
as if Disney Partner had actually funded the Partnership instead of making the
loan to Starwave Partner.
6.3 ALLOCATIONS. After receipt of the Annual Financial Statements in any
fiscal year and subject to the special allocations of Section 6.6:
(a) ABC Partner shall be allocated 40% of the Net Loss in any fiscal
year and 50% of the Net Income in any fiscal year;
(b) Starwave Partner shall be allocated 60% of the Net Loss in any
fiscal year and 50% of the Net Income in any fiscal year.
6.4 DISTRIBUTIONS. The Partnership shall make cash and/or asset
distributions at the end of each fiscal year upon receipt of the Annual
Financial Statements or when otherwise deemed appropriate by the Partners in the
same proportions as the cash contributions for each Partner in each fiscal year
attributable to such fiscal year.
6.5 CAPITAL ACCOUNTS. The Partnership shall maintain for each Partner a
single capital account (a "Capital Account") with respect to the Partner's
Partnership Interest in accordance with the regulations issued pursuant to Code
Section 704. The Capital Account of each Partner shall be maintained for such
Partner in accordance with the following provisions:
(a) To each Partner's Capital Account there shall be credited (i) the
amount of cash or the Asset Value contributed to the capital of the Partnership
by such Partner pursuant to any provision of this Agreement, (ii) the amounts of
such Partner's distributive share of Net Income allocated pursuant to Section
6.3 and any items in the nature of income or gain that are specially allocated
pursuant to Section 6.6, and (iii) the amount of any Partnership liabilities
that are assumed by such Partner.
(b) To each Partner's Capital Account there shall be debited (i) the
amount of cash or the Asset Value distributed to such Partner pursuant to any
provision of this Agreement, (ii) the amounts of such Partner's distributive
share of Net Loss allocated pursuant
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to Section 6.3 and any items in the nature of expenses or losses that are
specially allocated pursuant to Section 6.6, and (iii) the amount of any
liabilities of such Partner that are assumed by the Partnership.
(c) In the event that all or a portion of a Partnership Interest is
Transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent that it relates
to the Transferred interest.
(d) In determining the amount of any liability for purposes of
paragraphs (a) and (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations. The
foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations (S)(S)
1.704-1(b) and 1.704-2 in order that the allocations of Revenues and Costs under
this Agreement are deemed to have substantial economic effect, and shall be
interpreted and applied in a manner consistent with such Regulations. In the
event that the Partners mutually determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership or any Partner), are computed in order to comply with such
Regulations, the Partners may make such modification, provided that it is not
likely to have a significant effect on the amounts distributable to any Partner
hereunder upon the dissolution of the Partnership.
6.6 SPECIAL ALLOCATIONS.
(a) PREFERRED RETURN. A Funding Partner shall be specially allocated
Net Income equal to 15% per annum on the funding provided on behalf of the
Nonfunding Partner (and not subsequently made up by the Nonfunding Partner)
until such time as the Nonfunding Partner contributes all of the remaining
unfunded amounts to the Partnership.
(b) RECONCILIATION OF CAPITAL ASSETS. At the end of the fifth fiscal
year of the Partnership (and each subsequent fifth fiscal year during the Term),
the Partners shall cause the Partnership to make a special allocation of Net
Income or Net Loss, if necessary, to ensure that cumulative deductions
attributable to capital assets are consistent with each Partner's financial
contribution with respect to such capital assets.
(c) REGULATORY ALLOCATIONS TO CAPITAL ACCOUNTS. The following special
allocations shall be made in the following order:
(i) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations (S) 1.704-2(f), notwithstanding any other provision of this Article
6, if there is a net decrease in Partnership Minimum Gain during any Partnership
year, each Partner shall be specially allocated items of Partnership income and
gain for such period (and, if necessary, subsequent periods) in an amount equal
to such Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Regulations (S) 1.704-2(g). Allocations pursuant
to the previous sentence shall be made in proportion to the respective
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amounts required to be allocated to each Partner. The items to be so allocated
shall be determined in accordance with Regulations (S)(S) 1.704-2(f)(6) and
1.704-2(j)(2). This Section 6.6(c)(i) is intended to comply with the minimum
gain chargeback requirement in Regulations (S) 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations (S) 1.704-2(i)(4), notwithstanding any other provision
of this Article 6, if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal
period, each Partner who has a share of the Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such period (and, if necessary, subsequent
periods) in an amount equal to such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations (S) 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amount required to be allocated to each Partner pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations (S)(S) 1.704-
2(i)(4) and 1.704-1(j)(2). This Section 6.6(c)(ii) is intended to comply with
the minimum gain chargeback requirement in Regulations (S) 1.704-2(i)(4) and
shall be interpreted consistently therewith.
(iii) CERTAIN SECTION 754 ADJUSTMENTS. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant to Code
Section 743(b), Code Section 732(d) or Code Section 734(b) is required to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of its interest in the
Partnership, pursuant to Regulations (S) 1.704-1(b)(2)(iv)(m), the amount of
such adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Partners in accordance with their interests in the Partnership as determined
under Regulations 1.704-1(b)(3) in the event Regulations (S) 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution was made
in the event Regulations (S) 1.704-1(b)(2)(iv)(m)(4) applies.
(iv) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any fiscal period shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations (S) 1.704-2(i)(1).
6.7 OTHER CAPITAL ACCOUNT ALLOCATION RULES.
(a) ALLOCATIONS WHEN PERCENTAGE INTERESTS CHANGE. For purposes of
determining the Net Income or Net Loss allocable with respect to any period, Net
Income or Net Loss shall be determined on a daily, monthly or other basis, as
determined by the Partners using any permissible method under Code Section 706
and the Regulations thereunder.
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(b) TAX REPORTING. The Partners are aware of the income tax
consequences of the allocations made by this Article 6 and hereby agree to be
bound by the provisions of this Agreement in reporting their shares of
Partnership income, gain, loss, deduction and expenses for income tax purposes.
6.8 TAX ALLOCATIONS: CODE SECTION 704(C).
(a) GENERALLY. Except as otherwise provided in this Section 6.8, each
item of Partnership income, gain, loss, deduction and expense shall be allocated
to the Partners consistent with the allocations to Capital Accounts provided for
in this Agreement. Any item of income, gain, loss, deduction or credit,
including depreciation recapture, with respect to any property (other than
money) that has been contributed by a Partner to the capital of the Partnership
and which is required to be allocated to the Partners for income tax purposes
pursuant to Code Section 704(c) so as to take into account the variation between
the adjusted basis of such property for federal income tax purposes and its fair
market value at the time of contribution shall be allocated to the Partners in
the manner so required by Code Section 704(c) and the Regulations thereunder.
(b) ELECTIONS. Any elections or other decisions relating to
allocations pursuant to this Section 6.8 shall be made by the Partners in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 6.8 are solely for purposes of federal,
state and local income taxes.
6.9 INTEREST ON CAPITAL ACCOUNTS. Except as specifically provided herein,
no Partner shall be entitled to any interest on its Capital Account or its
contributions to the capital of the Partnership, nor shall any Partner have the
right to demand or receive the return of all or any part of its Capital Account
or its contributions to the capital of the Partnership.
6.10 AUDITS. The Partnership shall employ Price Waterhouse to prepare and
deliver to the Partners an audit of the Annual Financial Statements. In
addition, promptly upon written notice and during normal business hours, either
Partner may (and may employ third-party accounting firms for assistance), no
more often than twice each fiscal year and at its expense, audit, inspect and
take extracts and copies from the other Partner's records with respect to the
News Products subject to reasonable confidentiality protections for the other
Partner's records and information. Either Partner may (and may employ third-
party accounting firms for assistance) audit, inspect and take extracts and
copies from the records of the Partnership at any time during normal business
hours.
7. EXCLUSIVITY
7.1 STARWAVE PARTNER EXCLUSIVITY. During the Term and in the Territory,
and except for activities associated with the development, expansion and
commercialization of the news Component of the Portal Products and Search or
Directory, Starwave Partner and its Affiliates shall not develop, distribute,
produce, or exploit, or market or promote on-air, or, provide services of any
nature or provide a license or permit a third party to utilize any of their
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respective Intellectual Property Rights with respect to any Remote Access
Products that are dedicated primarily to national and international news,
including, by way of example and without limitation, stories and features
regarding national, international and local affairs and stories and features
regarding business/finance, entertainment, weather, environmental and other
subjects, to the extent such subjects are of national or international
significance or are treated as such in traditional news media. Notwithstanding
the foregoing, Starwave Partner and its Affiliates may engage in such activities
with respect to any Remote Access Products dedicated primarily to entertainment
news or personal finance news.
7.2 ABC PARTNER EXCLUSIVITY. During the Term and in the Territory, and
except for activities associated with the development, expansion and
commercialization of the news Component of the Portal Products, ABC Partner and
its Affiliates shall not develop, distribute, produce, exploit or provide
services of any nature or market or promote on-air (subject to the current
agreement between ABC and America Online, dated March 5, 1997, as amended) or
provide a license or permit a third party to utilize any of their respective
Intellectual Property Rights with respect to any Remote Access Products that are
dedicated primarily to national, international and local news, including, by way
of example and without limitation, stories and features regarding national and
international affairs and stories and features regarding business/finance,
entertainment, weather, environmental and other subjects, to the extent such
subjects are of national or international significance or are treated as such in
traditional news media. Notwithstanding the foregoing, ABC Partner and its
Affiliates may engage in such activities with respect to any Remote Access
Products dedicated primarily to entertainment news or personal finance news. If
during the Term, ABC Partner owns an entertainment news Remote Access Product
that competes with Mr. Showbiz (other than entertainment news coverage that
represents 25% or less of the Content of a larger service owned by DEI or its
Affiliates (e.g., XXX.xxx)), ABC Partner shall, at Starwave Partner's option,
either take all necessary action to have the Partnership (a) assign back to
Starwave all right, title and interest of the Partnership in Mr. Showbiz or (b)
continue to own Mr. Showbiz but permit Starwave to develop and market Mr.
Showbiz as an independent property without the restrictions set forth in Section
7.1; provided, that in each case, Starwave shall provide the Partnership with a
royalty-free license (subject to compliance with a promotion plan to be mutually
agreed upon by the Advisory Committee) to use Mr. Showbiz as part of the Remote
Access Products during the Term and, in the case of clause (b), ABC Partner
shall continue to promote Mr. Showbiz as provided in such promotion plan.
7.3 NO OTHER RESTRICTIONS. Except as expressly set forth in this Section
7, neither ABC Partner and its Affiliates, on the one hand, nor Starwave Partner
and its Affiliates, on the other hand, shall be subject to any restrictions on
the licensing, use, distribution or other exploitation of their respective
properties (including all Intellectual Property Rights therein) that either
Partner or any of its Affiliates own, control, have a license to, or in which
they have any other form of right, title or interest.
7.4 BROADBAND APPLICATIONS. For clarification purposes, ABC Partner and
its Affiliates, on the one hand, and Starwave Partner and its Affiliates, on the
other hand, in their respective sole discretion, may develop, produce, exploit
or provide services of any nature with
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respect to programming designed specifically for Broadband delivery (i.e.,
content that requires Broadband transmission to satisfactorily deliver services
to consumers). ABC Partner agrees to investigate (without any obligation)
cooperation with Starwave Partner in the development of products designed for
Broadband delivery.
8. PROPRIETARY RIGHTS.
The Partnership shall jointly own all the Technology, Content (other than
ABC Content, if any) and Programming developed and funded by the Partnership or
jointly funded by the Partners pursuant to Section 6.1(c) during the Term for
the News Products. Ownership of Technology, Content and Programming funded by
Starwave or ABC shall be governed as provided in the Service Agreement.
9. CONFIDENTIAL INFORMATION
The definition and use of each Partner's "Confidential Information" by the
other Partner shall be governed by the terms of that certain Mutual Non-
Disclosure Agreement between the Partners dated March 28, 1997.
10. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
10.1 WARRANTIES OF STARWAVE PARTNER. Starwave Partner represents and
warrants that (a) it has the right, power and authority to enter into this
Agreement and fully to perform its obligations under this Agreement; (b) the
making of this Agreement by it does not violate any agreement existing between
it and any other person or entity; (c) it complies, and at all times shall
comply, with all applicable laws, rules and regulations in effect at the time
services are performed pursuant to this Agreement pertaining to the subject
matter hereof; and (d) it shall not exercise any of the rights granted to it
under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
10.2 INDEMNIFICATION OBLIGATIONS OF STARWAVE PARTNER. Starwave Partner
agrees to, and shall, indemnify, defend and hold harmless ABC Partner and its
Affiliates and their respective directors, shareholders, officers, agents,
employees, successors and assigns from and against any and all claims, demands,
suits, judgments, damages, costs, losses, expenses (including reasonable
attorneys' fees and expenses) and other liabilities arising from actions brought
by third parties in connection with or related to, directly or indirectly, any
breach or alleged breach of any of the representations or warranties made by it
under this Agreement. The foregoing obligations of Starwave Partner shall be
subject to (i) ABC Partner giving Starwave Partner sole control of the defense
and/or settlement of any third party claims, and (ii) ABC Partner providing
Starwave Partner with reasonable assistance and full information at Starwave
Partner's expense. ABC Partner shall promptly notify Starwave Partner of any
such claim, and Starwave Partner shall bear full responsibility for the defense
(including any settlements) of any such claims (i) Starwave Partner shall keep
ABC Partner informed of, and consult with ABC Partner in connection with the
progress of such litigation or settlement; and (ii) Starwave Partner shall not
have any right, without ABC Partner's written consent, to settle
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any such claim if such settlement arises from or is part of any criminal action,
suit or proceeding or contains a stipulation to or admission or acknowledgment
of, any liability or wrongdoing (whether in contract, tort or otherwise) on the
part of any ABC Affiliate,
10.3 WARRANTIES OF ABC PARTNER. ABC Partner represents and warrants that
(a) it has the right, power and authority to enter into this Agreement, to grant
the licenses herein granted, and to fully perform its obligations under this
Agreement; (b) the making of this Agreement by it does not violate any agreement
existing between it and any other person or entity; (c) it complies, and at all
times shall comply, with all applicable laws, rules and regulations in effect at
the time services are performed pursuant to this Agreement pertaining to the
subject matter hereof; and (d) it shall not exercise any of the rights granted
to it under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
10.4 INDEMNIFICATION OBLIGATIONS OF ABC PARTNER. ABC Partner agrees to,
and shall, indemnify, defend and hold harmless Starwave Partner and its
Affiliates, and its directors, shareholders, officers, agents, employees,
successors and assigns from and against any and all claims, demands, suits,
judgments, damages, costs, losses, expenses (including reasonable attorneys'
fees and expenses) and other liabilities arising from actions brought by third
parties, in connection with or related to, directly or indirectly, any breach
or alleged breach of the representations and warranties made by it under this
Agreement. Starwave Partner shall promptly notify ABC of any such claim, and
ABC shall bear full responsibility for the defense of such claim (including any
settlements) provided however, that (i) ABC Partner shall keep Starwave Partner
informed of and consult with Starwave Partner in connection with the progress of
such litigation or settlement; and (ii) ABC Partner shall not have any right,
without Starwave Partner's written consent, to settle any such claim if such
settlement arises from or is part of any criminal action, suit or proceeding or
contains a stipulation to or admission or acknowledgment of, any liability or
wrongdoing (whether in contract, tort or otherwise) on the part of Starwave
Partner.
10.5 CHOICE OF COUNSEL AND PROTECTION OF RIGHTS. Each Partner shall have
the right, in its absolute discretion, to employ attorneys of its own choice and
to institute or defend any matter, claim, action or proceeding and to take any
other appropriate steps to protect its Intellectual Property Rights and all
rights and interest in and title to its web sites, technology, content and every
element thereof and, in that connection, to settle, compromise in good faith, or
in any other manner dispose of any matter, claim, action, or proceeding and to
satisfy any judgment that may be rendered, in any manner as such Partner in its
sole discretion may determine.
10.6 NO OTHER REPRESENTATIONS. Except for the representations and
warranties specifically set forth in this Agreement, each party makes no other
representations and warranties of any nature whatsoever to the other parties.
10.7 NO SPECIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
IN THIS AGREEMENT, EXCEPT FOR LIABILITY ARISING UNDER SECTIONS 10.2 AND 10.4, NO
PARTY SHALL UNDER ANY
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CIRCUMSTANCES, BE LIABLE TO ANOTHER PARTY FOR ANY CONSEQUENTIAL, INDIRECT,
SPECIAL, INCIDENTAL OR EXEMPLARY DAMAGES (INCLUDING WITHOUT LIMITATION, LOST
PROFITS, LOSS OF ANTICIPATED BUSINESS, LOSS OF DATA OR BUSINESS LOSSES) EVEN IF
SUCH DAMAGES ARE FORESEEABLE AND EVEN IF THE BREACHING PARTY HAS BEEN APPRISED
OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
11. TERM AND TERMINATION
11.1 TERM. The term of this Agreement shall commence as of the Effective
Time and shall continue for a period of ten (10) years after the date of the
Effective Time, unless earlier terminated as set forth below (the "Term").
11.2 RENEWAL. Unless earlier terminated, the Partners shall begin renewal
negotiations in good faith beginning on the eight (8) year anniversary of the
Effective Time. If the Partners do not reach an agreement to extend this
Agreement on mutually acceptable terms within three hundred sixty (360) days
after negotiations begin, the exclusivity provisions contained in Sections 7.1
and 7.2 shall be deemed modified, with no action required of the Partners, to
permit either Partner to develop, produce, distribute, exploit or provide
services with respect to competitive Remote Access Products; provided, that
except for such modifications, this Agreement shall continue in full force and
effect until the expiration of the Term and, provided, further, neither Partner
may engage in such activities with respect to News Products then available to
consumers in any manner or available prior to the expiration of the Term. In
the event the exclusivity provisions contained in Sections 7.1 and 7.2 shall be
deemed modified, and either Partner develops, produces, distributes, exploits or
provides services with respect to Remote Access Products competitive with the
News Products, such Partner's Remote Access Products competitive with the News
Products shall be provided with a prominent position on the News Products, via
an above-the-fold link on the start page for the News Product, until the end of
the Term.
11.3 TERMINATION. Without prejudice to any other rights or remedies
available to the Partners, each Partner shall have the right, in its sole
discretion, to terminate this Agreement upon written notice to the other in the
event of the occurrence of one or more of the following:
(a) The other Partner (or DEI or Infoseek) makes any assignment for
the benefit of creditors or files a petition in bankruptcy (provided, that with
respect to ABC Partner's ability to terminate in the event that Starwave Partner
or Infoseek files a petition in bankruptcy, such petition shall have been
approved by a decision of the majority of Infoseek's Disinterested Directors (as
defined in that certain Governance Agreement by and between Infoseek and DEI) or
is adjudged bankrupt or is placed in the hands of a receiver;
(b) With respect to Starwave Partner's termination rights, if ABC
Partner willfully misuses the Starwave Marks or with respect to ABC Partner's
termination rights, Starwave Partner willfully misuses the ABC Marks, and (i)
the willful misuse occurs repeatedly and in each case in material breach of this
Agreement, and (ii) the willful misuse occurs more
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than three (3) times in any one year period ("Excepted Misuses"), and (iii) with
respect to each such willful misuse, the breaching Partner fails to Cure such
misuse within sixty (60) days after the nonbreaching Partner delivers written
notice of the misuse to the other Partner; provided however that (w) if the
misuse consists of displaying the ABC Marks within the News Products in a manner
such that the appearance of the ABC Marks does not conform to the requirements
set forth herein, and this misuse does not have a material adverse effect on ABC
Partner, such misuse shall be excluded from the Excepted Misuses; and (x) if the
Partner misusing the Marks of the other Partner is using its best efforts to
Cure the misuse, the Cure period shall be extended for so long as such efforts
are exercised; and (y) if a willful misuse is Cured within forty eight (48)
hours of an officer of the breaching Partner being notified in writing of such
misuse by the nonbreaching Partner, such willful misuse shall not count toward
the three (3) Excepted Misuses set forth above; and (z) if a Partner has not
willfully misused the other Partner's Marks within any six (6) month period
during the term hereof, all misuses occurring prior to the commencement of such
six (6) month period shall not count toward the three (3) Excepted Misuses set
forth above. In the event that a Partner misuses the other Partner's Marks
(whether willfully or otherwise), the Partner that misused the Marks shall
implement commercially reasonable policies to address the prevention of the
occurrence of such misuse in the future.
For purposes of this Section 11.3(b), the following terms shall have the
following meanings:
(i) "Marks" shall mean ABC Marks with respect to ABC Partner or
Starwave Marks with respect to Starwave; and
(ii) "misuse" by Starwave of an ABC Trademark shall mean a use of the
ABC Marks in a manner which materially breaches the provisions set forth in
Section 6.1 or 6.2 of the Management and Services Agreement attached hereto as
Exhibit A, either directly by Starwave or by a third party licensed by Starwave
to use the Marks; and
(iii) "Cure" shall mean if the misuse is performed directly by a
Partner, correcting the display or misapplication of the other Partner's Marks,
or if the misuse is performed by a third party under license by a Partner,
terminating the license or purported rights granted by Partner to use such Marks
and using reasonable efforts to cause the third party to cease its misuse of the
other Partner's Marks.
The Partners acknowledge and agree that the nature of Remote
Access Products and the Narrowband medium in general may result in a misuse of a
Partner's Marks being displayed in multiple locations and across multiple
networks. For the avoidance of doubt, if the same application of a Xxxx is
displayed multiple times or in multiple places as a direct or indirect result of
the Narrowband medium or the manner in which Remote Access Products are
operated, transmitted or otherwise made available electronically, such repeated
displays shall constitute no more than one misuse for purposes of counting
Excepted Misuses hereunder.
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(c) If the other Partner's Profit Participation is equal to or less
than 25% of the total Profit Participation and the Partnership sustains either
eight consecutive Net Loss fiscal quarters or ten total Net Loss fiscal
quarters; provided, that if the other Partner is Starwave Partner, ABC Partner
shall not be able to terminate unless either Starwave Partner has not qualified
pursuant to Section 6.2(e) for a loan from ABC Partner or such loan has been
treated as a Partnership capital contribution in accordance with its terms after
the expiration of the twelve (12) month period set forth in Section 6.2(e).
11.4 ADDITIONAL TERMINATION RIGHTS. [INTENTIONALLY OMITTED]
11.5 EFFECT OF TERMINATION. In the event of the expiration or termination
of this Agreement for any reason (including a material breach hereof), the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets (subject to Section 11.6) and
satisfying the claims of its creditors and Partners. No Partner shall take any
action that is inconsistent with, or not necessary to or appropriate for,
winding up the Partnership's business and affairs. The Partners shall be
responsible for overseeing the winding up and liquidation of the Partnership and
shall take full account of the Partnership's liabilities and property, and the
property of the Partnership shall be liquidated, and the proceeds therefrom, to
the extent sufficient therefor, shall be applied and distributed to the payment
and discharge of all of the Partnership's debts and liabilities to creditors of
the Partnership prior to distributions to the Partners pursuant to Section 11.6.
11.6 LIQUIDATING DISTRIBUTIONS. Upon the expiration or termination of this
Agreement, and after the payment and discharge of all of the Partnership's debts
and liabilities to third-party creditors, the Partnership shall liquidate and
distribute its assets in accordance with Capital Accounts; provided, that the
Partners may elect to receive a distribution of the following assets (at their
respective Asset Values, without taking into consideration the values of the
associated ABC Trademarks nor the values of any Technology, or other development
tools, software, hardware, middleware, or technical know-how licensed to the
Partnership by Starwave or its Affiliates) in lieu of a portion of a cash
distribution (except with respect to clauses (a) and (b) below, which shall be
distributed without giving effect to a reduction of any cash distribution) and
shall contribute cash to the Partnership as necessary to provide that the assets
of the Partnership are distributed in accordance with Capital Accounts:
(a) ABC Partner shall own the brand and name of the News Products and
all other descriptive names developed or used during the Term that contain an
ABC Trademark and the Partnership and Starwave Partner shall assign to ABC
Partner all of its right, title and interest in any registration or other
indicator of ownership and ABC Partner shall own all URLs containing "ABC" and
any variant thereof and the Partnership and Starwave Partner shall assign to ABC
Partner all of its right, title and interest in any registration or other
indicator of ownership;
(b) As among Starwave Partner, DEI, and ABC Partner and each of their
respective Affiliates, Starwave Partner shall own all Technology licensed by
Starwave Partner and its Affiliates to the Partnership in connection with the
operation of the News Products;
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(c) With respect to in-kind distributions of assets of the
Partnership:
(i) ABC Partner shall be entitled to receive as an in-kind
distribution, the assets (including personnel) of the affiliate relations group
(referenced in Section 3.4(b)) and all other editorial-related Content assets,
including personnel and content licenses;
(ii) Starwave Partner shall be entitled to receive as an in-kind
distribution, all remaining assets (other than customer lists) and personnel of
the Partnership including without limitation all Technology Assets together with
all technology licenses between Starwave or third parties and the Partnership.
For purposes of this Agreement, "Technology Assets" means all technology-related
assets of the Partnership or jointly owned by the Partnership including without
limitation all Programming, Technology, and other development tools, software,
hardware, middleware and technical know-how;
(iii) With respect to all such in-kind distributions, all assets
distributed shall be valued at their respective Asset Values (subject to the
parenthetical within the first sentence of Section 11.6 above) and the
Partnership and the assigning Partner shall assign to the other Partner all of
its respective right, title and interest in such assets, including employment
agreements;
(iv) The assigning Partner agrees to not solicit for hire or
hire any employee in any of the groups or performing functions associated with
the assets being distributed pursuant to this Section for a period of fifteen
(15) months starting from the date of the related in-kind distribution.
Upon the liquidation of the Partnership, if any Partner has a deficit
balance in its Capital Account (after giving effect to all contributions,
distributions and allocations for all fiscal periods, including the fiscal
period during which such liquidation occurs), such Partner shall be obligated to
contribute to the capital of the Partnership the amount necessary to restore the
Capital Account balance to zero as provided in Regulation 1.704-
1(b)(2)(ii)(b)(3).
11.7 PARTNERSHIP PROPERTY. Upon liquidation and after giving effect to
Section 11.6, the Partnership shall contribute all customer lists owned by the
Partnership to a California trust, with a mutually agreed trustee and both
Partners as equal beneficiaries. Such trust shall have a perpetual life (subject
to termination for material breach or bankruptcy of a Partner) and shall provide
that each Partner shall have a perpetual royalty free license to all customer
lists owned by the Partnership (and transferred to the trust). Neither Partner
may provide the customer lists to third parties unless mutually agreed.
Notwithstanding the foregoing, the perpetual grant hereunder shall be modified,
if necessary, with respect to certain assets if such perpetual grant would
materially diminish the value of such assets as a matter of law.
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11.8 SURVIVAL. Unless otherwise specified, all obligations that accrue
prior to any expiration or termination of this Agreement shall survive such
expiration or termination. In addition, and without limiting the generality of
the preceding sentence, Sections 8, 9, 10, 11, 12, 13.1, 13.2, 13.4, 13.6, 13.7,
13.10, 13.11, 13.12, 13.13, 13.14 and 14 shall survive the expiration or
termination of this Agreement for any reason.
11.9 INJUNCTIVE RELIEF. Each Partner acknowledges and agrees that the other
Partner may be irreparably harmed by any material breach of this Agreement by
it. Therefore, each Partner agrees that in the event that it breaches any of its
obligations hereunder, the other Partner in addition to all other remedies
available to it under this Agreement, or at law or in equity, shall be entitled
to seek all forms of injunctive relief including decrees of specific
performance, without showing or proving that it sustained any actual damages and
without posting bond.
12. OTHER RIGHTS OF DUTIES AND RESTRICTIONS ON THE PARTNERS
12.1 INDEMNIFICATION. All costs, expenses, liabilities, obligations,
losses, damages, penalties, proceedings, actions, suits or claims of whatever
kind or nature which may be imposed on, incurred by, suffered by, or asserted
against the Partnership, any Partner or any Partner's respective Affiliates,
directors, officers and employees, in connection with the ownership or
management or operation of the business and affairs of the Partnership shall be
referred to as "Claims." The Partnership shall indemnify and hold harmless each
Partner and their respective Affiliates, directors, officers and employees
("Related Persons") for all Claims other than those caused by such Partner's or
such other Related Person's negligence, willful misconduct or breach of this
Agreement. Each Partner shall indemnify and hold harmless the Partnership and
each other Partner for all Claims sustained by any of them resulting from such
Partner's negligence, willful misconduct or breach of this Agreement.
12.2 CONTRIBUTION. In the event that any Partner shall pay in good faith
or become obligated to pay any proper obligation of the Partnership, such
Partner shall be entitled to contributions from the other Partners to the extent
necessary so that, after giving effect to such contributions, each Partner shall
bear no more than that part of such obligation which corresponds to its
respective Capital Contribution obligations at the time of the occurrence,
circumstances, events or conditions giving rise to the obligation.
13. GENERAL PROVISIONS
13.1 NOTICES. All notices which either Partner or the Partnership is
required or may desire to serve upon the other Partner, DEI or the Partnership
shall be in writing and addressed as follows:
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(a) if to ABC Partner:
ABC News
00 X. 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
DOL Online Investments, Inc.
000 X. Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Disney Enterprises, Inc.
000 X. Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) if to the Partnership, c/o:
Starwave Corporation
00000 XX Xxxxxxxx Xxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Xxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
DOL Online Investments, Inc.
000 X. Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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(b) if to DEI:
Disney Online
000 X. Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Disney Enterprises, Inc.
000 X. Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) if to Starwave Partner:
Starwave Corporation
00000 XX Xxxxxxxx Xxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Xxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any such notice may be served personally or by mail (postage prepaid),
facsimile (provided oral confirmation of receipt is immediately obtained and a
hard copy is concurrently sent by internationally commercially recognized
overnight delivery service), internationally commercially recognized overnight
delivery service (such as Federal Express or D.H.L.) or courier. Notice shall be
deemed served upon personal delivery or upon actual receipt. Either Partner or
the Partnership may change the address to which notices are to be delivered by
written notice to the other Partner and the Partnership served as provided in
this Section 13.1.
13.2 ENTIRE AGREEMENT. This Agreement, together with the Exhibits attached
hereto and hereby incorporated herein by reference, constitutes the complete,
final and exclusive understanding and agreement between the Partners with
respect to the transactions contemplated, and supersedes any and all prior or
contemporaneous oral or written representation, understanding, agreement or
communication between the Partners concerning the subject matter hereof.
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13.3 AMENDMENTS. All amendments or modifications of this Agreement shall
be binding upon the Partners so long as the same shall be in writing and
executed by each of the Partners hereto.
13.4 WAIVER. No waiver of any provision of this Agreement or any rights or
obligations of either Partner hereunder shall be effective, except pursuant to a
written instrument signed by the Partner waiving compliance, and any such waiver
shall be effective only in the specific instance and for the specific purpose
stated in such writing.
13.5 FORCE MAJEURE. Neither Partner nor the Partnership shall be deemed in
default hereunder, nor shall it hold the other Partner or the Partnership
responsible for, any cessation, interruption or delay in the performance of its
obligations hereunder due to causes beyond its reasonable control including, but
not limited to: earthquake, flood, fire, storm or other natural disaster, act of
God, labor controversy or threat thereof, civil disturbance or commotion,
disruption of the public markets, war or armed conflict (whether or not
officially declared) or the inability to obtain sufficient material, supplies,
labor, transportation, telecommunications, power or other essential commodity or
service required in the conduct of its business, any change in or the adoption
of any law, ordinance, rule, regulation, order, judgment or decree (each a
"Force Majeure Event") provided that the Partner relying upon this Section 13.5:
(a) shall have given the other Partner and the Partnership written notice
thereof promptly and, in any event, within five (5) days of discovery thereof
and (b) shall take all steps reasonably necessary under the circumstances to
mitigate the effects of the force majeure upon which such notice is based.
13.6 NO THIRD PARTNER BENEFICIARIES. Nothing in this Agreement is intended
or shall be construed to give any person, other than the Partners hereto, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
13.7 RESTRICTION ON TRANSFER.
(a) Neither Partner shall, directly or indirectly, Transfer all or any
portion of its Partnership Interest or any rights therein (whether voluntarily
or by operation of law) without the consent of the other Partner, which consent
may be withheld by such Partner in its sole and absolute discretion; provided,
that ABC Partner shall be entitled to assign its Partnership Interest or any
rights therein to any Affiliate, provided that such Affiliate satisfies the
conditions of paragraph (b) below and shall remain an Affiliate of the Partner,
unless it obtains the prior written consent of the other Partner, which consent
may be withheld in the other Partner's sole discretion. Any Transfer or
attempted transfer by any Partner in violation of the preceding sentence shall
be null and void and of no force or effect whatsoever. No transferee of a
Partner's Interest shall be admitted as a substitute Partner without (i) the
prior unanimous written consent of the other Partners, which may be withheld by
any such Partner in its sole and absolute discretion and (ii) the receipt of any
applicable regulatory consents or approvals.
(b) A Transfer to an Affiliate shall be conditioned upon the following:
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(i) The transferor and transferee shall execute and deliver to
the Partnership such documents and instruments of conveyance as may be necessary
to effect such Transfer including, without limitation, the execution by the
transferee of a counterpart to this Agreement by which the transferee agrees to
all of the terms, obligations and provisions of this Agreement.
(ii) The Transfer shall not cause the Partnership to terminate
for federal income tax purposes and shall not have a material adverse income tax
consequence to the Partnership or the other Partner.
(c) Upon a merger, consolidation, reorganization, liquidation or
similar event affecting a Partner, its successor-in-interest will assure all
obligations of such Partner hereunder.
13.8 INSURANCE. The Partnership will purchase and maintain sufficient
product liability insurance to protect the Partners and the Partnership against
liability as a result of product liability claims made in connection with the
News Products.
13.9 PARTNERSHIP BANK ACCOUNTS AND FUNDS. The Partnership shall establish
bank accounts at such banks as may from time to time be designated by the
Partners. The Partnership's funds shall be invested in such manner as the
Partners deem appropriate with interest accruing to the Partnership. All bank
and other accounts shall be maintained in the Partnership's name. None of the
Partnership's funds shall be commingled with the funds of any Partner unless
previously approved in writing by the Partners. The Partners shall designate
the General Manager, as a signatory on the bank accounts of the Partnership to
accomplish more effectively the purposes of this Section 13.9.
13.10 CONSTRUCTION. This Agreement shall be fairly interpreted and
construed in accordance with its terms and without strict interpretation or
construction in favor of or against either Partner. Each Partner has had the
opportunity to consult with counsel in the negotiation of this Agreement.
13.11 CAPTIONS AND HEADINGS. The section and subsection headings and
captions appearing in this Agreement are inserted only as a matter of
convenience and shall not be given any legal effect.
13.12 SEVERABILITY. If any restriction, covenant or provision of this
Agreement shall be adjudged by a court of competent jurisdiction to be void as
going beyond what is reasonable in all the circumstances for the protection of
the interests of the Partner seeking to enforce such restriction, covenant or
provision, such restriction, covenant or provision shall apply with such
modifications as may be necessary to make it valid and effective. In the event
that any provision of this Agreement should be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
shall not in any way be affected or impaired thereby.
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13.13 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York. Any action arising out of or relating to this Agreement
shall be filed only in the courts of the State of California for the County of
Los Angeles, or the United States District Court for the Central District of
California. The parties hereby consent and submit to the personal jurisdiction
of such courts for the purposes of litigating any such action.
13.14 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
14. TAX MATTERS
14.1 PARTNERSHIP FOR TAX PURPOSES. The Partners intend to treat the
arrangement contemplated herein as a general partnership for tax purposes.
Accordingly, all transactions contemplated by this Agreement shall be
implemented in a manner that is consistent with such treatment.
14.2 PARTNERSHIP TAX YEAR. To the extent permitted by applicable tax law,
the Partnership's year end shall be September 30 for income tax purposes.
14.3 TAX MATTERS PARTNER. The Partners designate ABC Partner as the tax
matters partner, pursuant to Section 6231 of the Code. To the extent permitted
by applicable tax law, actions taken by ABC Partner in its capacity as the tax
matters partner shall require the prior joint approval of the Partners.
14.4 OVERSIGHT OF TAX MATTERS. The General Manager shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
losses, deductions, credits and other items necessary for federal, state and
local income tax purposes, shall provide copies of draft tax returns to each
Partner at least thirty days prior to filing the returns and shall use
reasonable good-faith efforts to furnish to the Partners within sixty days after
the close of each year of the Partnership the tax information reasonably
required for federal, state, and local income tax reporting purposes. The
General Manager shall use good-faith efforts to supply each Partner with the
information necessary to determine estimated tax payments or any other
information related to taxes reasonably requested by each Partner. The
classification, realization and recognition of income, gains, losses,
deductions, credits and other items shall be on the accrual method of accounting
for federal income tax purposes.
14.5 PARTNER SECTION 482 ADJUSTMENT. If the Internal Revenue Service
reallocates an item of income, deduction, or loss to a Partner or an Affiliate
pursuant to Section 482 of the Code or any similar rule or principle of law (a
"Partner Section 482 Allocation"), and the Partnership has a corresponding
correlative item of deduction, loss or income (as determined under Section
1.482-1(g) of the Regulations (the "Partnership Correlative Item"), such
Partnership Correlative Item shall be specially allocated to and reflected in
the Capital Account of the Partner that received (or whose Affiliate received)
such Partner Section 482 Allocation,
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and a corresponding contribution or distribution shall likewise be deemed to
have been made by or to such Partner.
IN WITNESS WHEREOF, the duly authorized representatives of each Partner
have executed this Agreement as of the day and year first written above.
DOL ONLINE INVESTMENTS, INC. STARWAVE VENTURES
By: /s/ Xxxxxxxx X. Xxxxxxx By: /s/ Xxxxxxxx X. Xxxxxxx
------------------------- -----------------------------
Name: Xxxxxxxx X. Xxxxxxx Name: /s/ Xxxxxxxx X. Xxxxxxx
Title: Vice President Title: Vice President
The undersigned parent corporations of the Partners agree to cause their
respective subsidiaries that are Partners (or other Affiliates, as necessary) to
fully perform their obligations hereunder. In addition, Disney Enterprises,
Inc. agrees to cause its Affiliates to provide to the Partnership all news-
related Content that is 100% owned by Disney Enterprises, Inc. and its
Affiliates, whether or not owned by ABC News, that may be necessary or useful in
the development and operation of the News Products and such Content shall be
deemed ABC Content for purposes of this Agreement and the Services Agreement.
DISNEY ENTERPRISES, INC. INFOSEEK CORPORATION
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxx
------------------------- ------------------------
Name: Xxxxx X. Xxxxx Name: Xxxxx X. Xxxxx
Title: Sr. Vice President Title: President and CEO
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